Silvercorp Metals to acquire Adventus in C$200M transaction

Silvercorp Metals announced that the parties have entered into a definitive arrangement agreement pursuant to which Silvercorp has agreed to acquire all of the issued and outstanding common shares of Adventus by way of a plan of arrangement. Under the terms of the arrangement agreement, each holder of the common shares of Adventus will receive 0.1015 of one Silvercorp common share in exchange for each Adventus share at the effective time of the transaction. The exchange ratio implies consideration of C$0.50 per adventus share based on the 20-day volume-weighted average prices, or VWAP, of Silvercorp Shares on the Toronto Stock Exchange on April 25. This represents a premium of 31% based on the 20-day VWAP of Silvercorp on the TSX and Adventus on the TSX Venture Exchange, both as at April 25. The implied equity value of the Transaction is approximately C$200M on a fully-diluted in-the-money basis. At closing, existing Silvercorp and Adventus shareholders will own approximately 81.6% and 18.4%, respectively, of Silvercorp shares outstanding on a fully-diluted in-the-money basis. Concurrent with entering into the arrangement agreement, Silvercorp and Adventus entered into an investment agreement pursuant to which Silvercorp will subscribe for 67,441,217 Adventus Shares at an issue price of C$0.38 per share, or C$25.63M in the aggregate. Upon completion of the Placement, Silvercorp will hold approximately 15% of the total issued and outstanding shares of Adventus. Proceeds from the placement will be used to repay the amounts outstanding under a credit facility with Trafigura Pte in the amount of approximately C$9.9M, which includes penalties payable for the early repayment under the facility, fund the settlement of the outstanding amounts payable pursuant to a convertible loan agreement between Adventus and Altius Resources in the amount of approximately C$9.6M, fund normal course activities at the El Domo project in the amount of approximately C$2.7M, and fund general working capital expenses in the amount of C$3.4M, which expenses are expected to include funding of early development expenditures to advance construction of the El Domo project and fund general and administrative expenses between announcement and closing of the transaction. The funding of the above listed expenses through the placement was a critical factor in Silvercorp determining to proceed with the transaction, as the majority of the expenses must be paid prior to the closing of the Transaction and Adventus does not have sufficient cash on hand to fund these costs. Silvercorp has requested the repayment of the Altius Loan as under the terms of this loan, Altius has the right to increase its royalty on the El Domo project. It is Silvercorp’s view that if this royalty right was exercised, it would have a negative impact on the project economics. Silvercorp has also requested the repayment of the Trafigura Facility, which matures on June 30, prior to the closing of the transaction. The remaining use of proceeds as set out above, are being directed towards general, administrative, project maintenance and project advancement expenditures, which expenditures will allow Adventus to keep the projects in good standing and continue or commence project development activities. Silvercorp views the funding of these expenses to be essential in terms of maintaining the goodwill of the company within the local community and the various levels of government. The completion of the placement has been conditionally approved by the TSXV and remains subject to final acceptance by the TSXV on behalf of Adventus for the listing of the Adventus shares to be issued to Silvercorp. The Adventus shares to be issued to Silvercorp will be subject to a statutory four-month hold period under applicable securities laws. Completion of the placement and the repayment of indebtedness does not provide a guarantee that the transaction will be completed. Under the terms of the transaction, Silvercorp will acquire all the issued and outstanding Adventus Shares and Adventus shareholders will receive 0.1015 Silvercorp Shares for each existing Adventus Share held. All outstanding Adventus stock options and warrants will become exercisable for Silvercorp Shares, with the number of Silvercorp Shares issuable on exercise and the exercise price adjusted in accordance with the Exchange Ratio. All outstanding Adventus restricted share units will immediately vest upon closing of the transaction and be settled in cash, funded by Silvercorp through Adventus. The transaction will be carried out by way of a court-approved arrangement under the Canada Business Corporations Act and a resolution to approve the transaction will be submitted to Adventus shareholders and holders of Adventus stock options and restricted share units at a special meeting of securityholders expected to be held on or about June 28. The transaction will require approval by 66 2/3% of the votes cast by Adventus shareholders and holders of options and restricted share units voting as a single class, and a simple majority that excludes those not entitled to vote in accordance with Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. Each of the directors and senior officers of Adventus, Ross Beaty and Wheaton Precious Metals Corp., representing in aggregate approximately 23% of the issued and outstanding Adventus Shares, have entered into voting support agreements with Silvercorp and have agreed to vote in favor of the transaction at the special meeting in accordance with those agreements. In addition, Salazar has entered into an agreement with Silvercorp whereby they have indicated they will support the transaction. In addition to Adventus securityholder and court approval, the transaction is also subject to the satisfaction of certain other closing conditions customary for a transaction of this nature. The transaction has been conditionally approved by the TSXV but remains subject to final approval of the TSXV on behalf of Adventus, and approval of the TSX and NYSE American on behalf of Silvercorp, including the acceptance for listing of the Silvercorp shares to be issued in connection with the transaction. The transaction is expected to be completed in the third quarter of 2024. The arrangement agreement includes representations, warranties, covenants, indemnities, termination rights and other provisions customary for a transaction of this nature. In particular, the arrangement agreement provides for customary deal protections, including a non-solicitation covenant on the part of Adventus and a right for Silvercorp to match any superior proposal. The arrangement agreement includes a termination fee of C$10M, payable by Adventus, under certain circumstances. BMO Capital Markets is acting as financial advisor to Silvercorp. McCarthy Tetrault and FBPH Abogados are acting as Silvercorp’s Canadian and Ecuadorian legal advisors, respectively. Cormark Securities is acting as financial advisor to Adventus. Bennett Jones and AVL Abogados are acting as Adventus’ Canadian and Ecuadorian legal advisors, respectively.